1/06/2015

Headline Jan 07, 2015/

''' OF POLICY :

NOT GOING ANYWHERE '''

IN SOUTH AFRICA, businesses with an annual turnover above 3m rand are also expected to obey a 2003 act which called for ''broad-based BEE''.

This set targets for black ownership as well as promotion and training of black workers. Private firms can bolster their empowerment rankings by buying from black-owned suppliers or by helping to set them up.

The white elite at the top of South African business has been joined by a sliver of super-rich blacks.

Forbes estimates that Cyril Ramaphosa, a union-boss-turned-tycoon who is now the ANC's number two, is worth $675 million.

23% more according to Adcorp, a big employment agency. Inequality between blacks and whites have narrowed a bit as result.

*The lot of poorer blacks, however, has not improved much*.

Many are frozen out of the workplace altogether. The unemployment rate among blacks is 28.5%, compared with 5.6% for whites. If those who want work but have given up looking for it are included:

The jobless rate is a whopping 461.6% for blacks compared with 7.5% for whites.

Some believe the policy has been essential if flawed. ''The reality is that without BEE there would not have been the same level of black participation in the economy,'' says Martin Kingston of Rothschild, which advises companies on BEE.

But the gains must be weighed against the policy's unintended consequences.

Pitifully few black South Africans have grown rich by creating entirely new businesses, perhaps because it seems so much easier to make money by acquiring stakes in existing firms.

The collapse in stock prices in 2006 left many would-be-tycoons with assets that were worth less than the loans taken out to buy them.

The allegations surrounding Gold Fields fit a familiar pattern. In BEE deals, political connections often matter more than business skills.

A costly bureaucracy has grown up to enforce racial targets, which even black-owned firms have to contend with. Posts are left vacant for want of qualified black staff.

Some businesses re-employ white professionals as freelance consultants to plug skills shortages without falling foul of the law.

The binding constraint on greater black participation in the economy is education says Lucy Holborn from South African Institute of Race Relations, a think-tank that called for BEE to be scrapped.

The proportion of professionals who are black is 36% , fairly close to the share of degrees held by blacks, which is around 40%.

But that falls short of the 75% share of the total workforce who are black. It is no good setting quotas if there are not the skilled workers to fill them says Ms Holborn.

Few businessfolk or politicians have echoed the call to junk BEE. The ANC is not about to lose power and no sensible business wants to offend it.

Far from scrapping BEE rules, the government is seeking stiffer penalties for firms that flout them.

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